Virginia Gov. Terry McAuliffe signed a fantasy sports bill on Monday, making it the first state to enact a law to regulate the industry.
The basics of the bill
The deadline for McAuliffe to act on the bill was Monday. He opted to sign the bill as-is; his other options would have been to veto it, do nothing and allow it to become law, or use a line-item veto to amend the bill and send it back to the legislature.
The bill creates the Fantasy Sports Act. Basic provisions include:
- Operators must register with the Department of Agriculture and Consumer Services.
- Operators must pay a $50,000 fee to register in the state.
- The DACS may investigate violations of the act and is granted powers to enforce it.
- Sites must take steps to prevent employees and their immediate relatives from playing in contests; to ensure security of data at the sites; and to segregate player funds from operational funds, among other consumer protections.
- Sets a minimum age of 18 to play DFS.
- An annual audit of all registered operators is required.
The Virginia bill does not ring-fence the market, and allows interstate play.
While the bill has more teeth to it than the bills being moved forward in a lot of other states, its efficacy at regulating DFS is still in question. It could also serve to authorize a wide-range of sports betting outside of the fantasy sports realm.
Industry and legislator statements
“This is an important day for the future of fantasy sports,” the bill’s sponsor, Senator Ryan McDougle said via a press release that came via FanDuel. “Virginia is leading the way in establishing strong consumer protections while sending a clear message that, with the proper oversight, playing fantasy sports is a skill-based hobby people should be allowed to enjoy.
“Although it is already legal to play fantasy sports in Virginia, this legislation provides additional consumer safeguards. I am that pleased Virginia is the first state to regulate fantasy sports sites, allowing Virginians to continue playing the games they love.”
Griffin Finan, director of public affairs for DraftKings, offered the following statement after the news broke:
“Today, Virginia became the first state in the nation this year to put in place a thoughtful and appropriate regulatory framework to protect the rights of fantasy players. We thank Governor McAuliffe for his leadership and advocacy and are hopeful that other states across the country will follow Virginia’s lead. We will continue to work actively to replicate this success with dozens of legislatures and are excited to continue these efforts.”
And Cory Fox, counsel for policy and government affairs for FanDuel:
“Governor McAuliffe and members of the Virginia legislature took a thoughtful, deliberative approach to establishing a law that safeguards fantasy sports while installing consumer protections. Virginia showed real leadership in being the first state to pass smart regulations this year and we hope to see more states follow Virginia’s lead in the months ahead.”
Who will apply for a license?
The $50,000 licensing fee will likely stop some operators from entering the DFS market.
Obviously, DraftKings and FanDuel will not balk at the fee; Yahoo, the third largest operator, seems like a sure bet to also apply for a license.
Beyond that, it’s possible some smaller operators that have eyed a regulated market will want to show their desire to be a part of one. In that scenario, operators will eat the cost to be a part of the first state to enact DFS regulations. Possibilities in that category include Star Fantasy Leagues, DraftDay, iTEAM Network and StarsDraft (Amaya’s DFS platform.)
It’s also feasible that some of the second-tier DFS operators — like Fantasy Feud, Fantasy Aces, FantasyDraft, Draftpot and DraftOps — will do the same.
The fee structure makes it nearly impossible for any paid-entry season-long fantasy sports sites to be a part of the Virginia market. Season-long operators last week had pleaded with the governor to amend the bill to allow them to continue to serve the state.
Legal Sports Report is in the process of reaching out to operators to gauge their response to the Virginia news.
The registration process
Now that a fantasy sports bill has finally made it to the finish line, the attention — at least in Virginia — turns to the mechanics of actually licensing and regulating the industry.
The Department of Agriculture and Consumer Services is tasked with overseeing the industry; getting and up and running for starting the licensing procedure will likely take some time. A form, at minimum, will need to be created, with which sites can register with the state. How long that process might take is a matter of speculation, for now.
Until DACS is taking applications actively, it appears that operators could stay open in Virginia. (Do not construe that educated guess as legal advice, however.) Once applications are being taken by the state, this provision kicks in:
Any operator applying for registration or renewal of a registration may operate during the application period unless the Department has reasonable cause to believe that such operator is or may be in violation of the provisions of this chapter and the Department requires such operator to suspend the operation of any fantasy contest until registration or renewal of registration is issued.
At that time, operators who are not applying for a license would seemingly have to stop taking customers in the state.
How long will the licensing procedure take? From the law:
The Department shall issue such registration within 60 days of receipt of the application for registration. If the registration is not issued, the Department shall provide the operator with the justification for not issuing such registration with specificity.